Baroness Blatch: My Lords, I am grateful to the Minister for giving way. I was amused because what is there in the system, what is there in the proposals and what is there in the Bill that makes up for the 50 per cent. maintenance grant that the poorer students have to borrow that the more affluent students do not have to borrow?

Baroness Blackstone: My Lords, I was just about to complete what I was saying about the poorer students ending up with the largest debts. I can make an immediate reply to the noble Baroness as to what does make it up. They will have a loan scheme which is income contingent and fairer and which they can pay back according to their income rather than the loan scheme which existed under the previous government that required them, regardless of income, to pay back all that they owed within five years.

I shall return to one of the basic principles underlying our proposals. It is one that I have heard no noble Lord dispute. It is that graduates, as the clear main beneficiaries of higher education, should make a larger contribution to its costs. That was a Dearing principle that we accepted and to which we are adhering. It is wrong to see the fairness of the student loan arrangements just in terms of the size of the debt. As I have just said, the fairness of the student loan arrangements lies in two things: the availability of support and cash for living costs for those who need it most and whose access to higher education might otherwise be hindered. It is the making of fair terms for the repaying of those loans based on the ability to pay.

As I have just said, students will not repay their support on the basis of their current position but on the basis of their future earnings. Students will repay their loans as earning graduates, not as school-leavers from poor backgrounds. In most cases graduates will repay their loans over a longer period than they would, as I said, under the current arrangements. I am sorry to reiterate this, but it is important that noble Lords understand that. Students from less well off backgrounds who take out the full loan available will be eligible to

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receive the largest public subsidy over time. That subsidy is of course additional to the support that they will receive towards the cost of their tuition, which is considerable, because that group of students will not be making a contribution towards their tuition.

I hope that I have been able to reassure Members of your Lordships' House of the Government's commitment to securing wider participation in higher education. I hope also that noble Lords will reflect upon the evidence that I cited. I have not yet mentioned the specific steps that we announced to target support on those students experiencing the greatest need.

I should like to take the opportunity to remind noble Lords again that students from lower income backgrounds--that is, about 30 per cent. of the total--whose parental income is to be taken into account will not be required to contribute towards the costs of their tuition. Many students from middle income backgrounds will also receive help towards their fees. We have pumped more money into the access funds. We have broadened the eligibility to include part-time students. That is an important broadening of eligibility. We are also making available an additional £250 loan for those students in particular hardship. We have ended the means testing of the disabled students' allowance. We are retaining supplementary allowances for students with dependants and those who are lone parents.

My right honourable friend the Secretary of State announced in another place on 8th June that we will be extending loans for students aged under 55 at the start of their courses from the academic year 1999-2000. That will help the development of our policy on lifelong learning.

We are not complacent. We shall continue to monitor closely the pattern of applications and entry to higher education among students from different socio-economic backgrounds. That is obviously important. My department has also commissioned regular surveys of student income and expenditure. We shall look carefully at the impact of our proposals on student finances once they have fully taken effect. On the basis of all the evidence available, and taking into account the specific measures that I have outlined, I am confident that our proposals will secure improved access to higher education.

Finally, I should like to remind the House that the replacement of maintenance grants by a system of income-contingent loans was a manifesto commitment. The amendments we are debating overturn amendments made during our earlier debates on the Bill which would prevent the Government from carrying out that commitment. I hope therefore that the House will abide by the Salisbury Convention and will not seek to reinstate the amendments.

4.45 p.m.

Lord Tope: My Lords, I thank the Minister for intervening early in this debate. I am not sure that all noble Lords agreed with what she said, but it was helpful that she said it. Perhaps I may correct her on one point. She referred on a number of occasions to

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"noble Lords opposite". There are at least two groups of noble Lords opposite. I hope that she and her Front Bench colleagues might distinguish occasionally between the two different groups.

On a more serious point, we are all concerned about the position of students, or potential students, from low income families going to university. I have no doubt that fear, whether real or perceived, of debt is an inhibiting factor. It may be more of an inhibiting factor for students from low income families who may be more used to and more ridden by debt. The real concern--the Minister referred to this--is that many people from low income families never seriously consider becoming university students. They are given no expectations at school. They almost certainly do not obtain the necessary qualifications through the school system even to consider whether to have a student loan or whether to go to university. That is an issue which may be outside the realm of this debate, but it is an issue of greater concern to us all than the worry about debt.

We have debated this issue in your Lordships' House many times during the Bill's progress. I do not need to prolong the matter. I shall merely restate briefly the position of these Opposition Benches on this issue. We are concerned to maintain and increase the numbers in higher education. We are at least as concerned to maintain and improve the quality of higher education.

We are, on principle, opposed to the student payment of tuition fees. I have rehearsed that argument many times in your Lordships' House, and do not need to do so again today. If additional funding has to come into higher education, and it does, then with some degree of reluctance we have had to accept that the maintenance grant must go. It is important therefore that it is replaced by a system of loans with a fair repayment process--an income-contingent repayment system.

Here again I agree with the Minister that the system that we support is one that will be based not on the prospective student's family's income or position but on the earning capacity of that student when he or she becomes a graduate and, it is hoped, will have a higher earning capacity. That is an important difference. We are talking about the income of the family at the start of the process. We are talking about the income of the graduate as he or she progresses in his or her career.

That is our position. It has been our position throughout. The noble Baroness, Lady Blatch, is fully aware of it. She often repeats it for me to audiences that we share, as she did at lunchtime today. For those reasons, we cannot support the noble Baroness's amendment today.

Baroness Lockwood: My Lords, I should like to support my noble friend in resisting these amendments. Not only has this issue been debated many times in the course of the Bill's progress but it has also been debated many times going back to the days before the setting up of the Dearing committee. The whole question of student finance has been a difficult financial and political issue for all the political parties. It was as a result of not having a solution to the problem, or of not

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being prepared to find a solution to the problem, that noble Lords opposite, when they were in power, set up the Dearing committee.

Even before the establishment of the Dearing committee, there was much discussion about the future of student maintenance and student loans. I remember discussions on that in this House. I remember from this side of the House, when the Conservative Party was in power, references being made to the high cost of higher education in the United Kingdom and to the fact that that resulted largely from the generous maintenance grants which were paid by the British Government and which no other country paid to its students. The debate then was very lively. First, we had the introduction of student loans partly to replace the maintenance grants. That discussion resulted in even the National Union of Students being prepared to accept that maintenance grants would have to go.

Then we had the advent of the Dearing committee. The noble Baroness, Lady Blatch, said that the Government acted too quickly and prior to the publication of the Dearing report. However, the fact is that continual discussions were taking place even while the Dearing committee was meeting. I remember being at meetings and conferences held under the auspices of several organisations which the noble Lord, Lord Dearing, attended and where he discussed the issues with those present. Clearly, both the Labour Party and the Conservative Party should have been considering the issues before the Dearing committee reported, ready to look at that report in the context of all the arguments and ready to come up with their responses.

In responding to the report, the Government accepted the main thrust of it. They accepted the recommendation that students should themselves make a contribution to the costs of higher education because they would be the beneficiaries. It was recommended that the loans system should be income-contingent. Again, the Government accepted that recommendation. Therefore, it seems to me that the main thrust of the report was accepted.

Having said that, the whole question of how to increase the finances available to higher education arose and we saw the introduction of the £1,000 contribution towards tuition fees. That was introduced on the basis of it being an income-contingent scheme. Like many noble Lords, I had reservations about that and about its effect on the higher education participation rate, particularly for those from lower income families. I have two points to make about that.

First, the participation rate from lower income families has never been high. It is growing slowly, but it is much lower than the participation rate of students from other social groups. The reason is exactly that which the noble Lord, Lord Tope, indicated: parents (and children) in low-income families do not think of their children attending a university. They must become part of the learning culture to which my noble friend referred before they will anticipate and expect that their children will have the benefit of higher education. Statistics from universities now seem to suggest that, despite the introduction of the fee, applications from 18 to 20 year-olds are increasing rather than declining.

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My reservation about the introduction of the fee was that the situation needs to be monitored. At an earlier stage in our proceedings I tabled an amendment to that effect and my noble friend the Minister assured me that there would be a monitoring system to watch what happens to the participation rate.

My second reservation was that the finances raised should go to the institutions concerned. We have had assurances to that effect, but I should like them to be reiterated so that we know that more money will go into the higher education system and to the universities. I accept what my noble friend has said all along, that there will be more money for further education, but we need more money for higher education as well. I should like those assurances to be reiterated because the universities have been starved of finance over the past 20 years or so. The unit of resource per student for universities has declined considerably. If we are to have a university system which is internationally competitive, we need it to be better financed. Therefore, I hope that money from the students' contributions will result in an increase in the funding available for higher education.

In her introduction my noble friend approached the problem much more positively by saying that we need to encourage a culture of learning both at an earlier age and throughout the system so that there is an effect on all sections of society. That would be the best way of moving forward and ensuring that our participation rate in higher education is not only equivalent to those of our colleagues in the rest of Europe and the western world but begins to exceed theirs. I believe that the way in which the present Government have approached the problem is the right one and that returning to student maintenance grants and not proceeding with an income-contingent loan would be a regressive step.